Veteran investor David Roche says Japan is not looking for a strong yen, but rather a relatively stable currency.
The Japanese yen has been on a roller coaster, falling above $160 against the US dollar last week, its biggest decline in more than 30 years. This trend has since intensified amid speculation about two interventions by Japanese authorities.
Roche, president and global strategist at Independent Strategy, told CNBC, “Japan is not aiming for a particularly strong yen. I think they are aiming for a relatively stable yen. “We don’t want it to go through the downside.” Thursday’s “Squawk Box Asia”.
Japan has acted to “avoid causing inflation that would undermine the position of the Bank of Japan governor.”
After the Bank of Japan’s monetary policy decision in April, the yen continued to depreciate despite warnings from the Japanese authorities.
Japanese authorities may have spent about $60 billion to support the yen after last week’s plunge, according to reports. The yen was most recently trading at around 155.61 yen against the dollar.
A summary of the Bank of Japan’s latest policy meeting released on Thursday revealed that the central bank is concerned that a sharp depreciation of the yen risks pushing up import prices.
“The recent depreciation of the yen and rising prices of crude oil and other products are beginning to affect producer prices through increases in import prices.” Bank of Japan Policy committee members said this at their last meeting, which ended on April 26.
The members said, “While a weak yen may depress the economy in the short term through rising prices due to factors that push up costs, it may push up underlying inflation in the medium to long term.”
The currency is weakening as expectations for Federal Reserve interest rate cuts fade and the dollar continues to rise.
Roche said Japan “can’t possibly take any policies that would really cause the yen to appreciate unless it tightens monetary policy,” which would require raising interest rates by at least 50 basis points and “sterilizing intervention” in the yen. It added that it includes acceptance.
“In other words, the domestic currency supply will shrink. Statistics show that they [Bank of Japan] We have done nothing of the sort,” Roche pointed out.
